Econostrum | Economic News in the Mediterranean

The Southern and Eastern Mediterranean region should post a growth of 4.2% in 2021

Written by Eric Apim on Thursday, November 4th 2021 à 16:00 | Read 323 times

MEDITERRANEAN. In its latest Regional Economic Outlook (REO) report , published on Thursday 4 November 2021, the European Bank for Reconstruction and Development (EBRD) is more optimistic about growth in the Southern and Eastern Mediterranean (SEMED) region. At least for 2021. "The recovery of economic activity has begun in most of these countries," the EBRD notes. In June 2021, a previous study   by the same institution forecast growth of only 3.8% in 2021 and 4.6% in 2022. It should finally average 4.2% in 2021 and 4.4% in 2022 thanks to a rebound in agriculture and telecommunications, as well as limited growth in tourism and exports.

The bank also sees other positive parameters to be taken into account such as the global recovery, progress in immunisation, increased political stability, the implementation of business environment reforms to increase competition and others to improve governance, fight corruption, advance digitalisation and promote inclusion.

Egypt and Morocco drive growth in the region

The recovery of the automotive and manufacturing sectors is driving Moroccan growth (photo: F.Dubessy)
The recovery of the automotive and manufacturing sectors is driving Moroccan growth (photo: F.Dubessy)
The increase in forecasts in the Semed region mainly concerns Egypt and Morocco. In the first country, one of the few in the world to have posted a rise in its GDP (+1.5%) in 2020, "growth slowed from 3.6% to 3.3% in the year ending June 2021", the report points out. The EBRD attributes this underperformance to sluggish manufacturing activity and weak tourism, which offset economic activity in the wholesale and retail trade, construction, agriculture and telecommunications sectors.

Egypt is, however, heading for 4.9% growth in 2021-2022 on the back of a boom in the telecommunications sector, the recovery of private consumption and investment, and the return of foreign direct investment (FDI). "Meanwhile, inflation slowed to 4.5% in the same fiscal year, below the central bank's target (Editor's note: 5.0-9.0%), and began to rise in the July-September 2021 period, averaging 5.9% year-on-year, driven by higher food and beverage prices," the paper said. 

Having returned to growth in the first half of 2021 (+7.4% year-on-year), Morocco should experience 5% growth in 2021 before slowing to 3.2% in 2022. It will benefit from a good rainy season favouring its agricultural sector and from the expected recovery in Europe, its main trading partner. But also from the strengthening of exports from the phosphate and automobile sectors. Inflation has accelerated (volatile food prices and rising energy prices), while remaining low. It averages 1.0% year-on-year in the first eight months of 2021.

Lebanon still in negative growth

For the other countries of the Semed region, development will be more modest. In Tunisia, growth contracted in the first quarter of 2021 and will only reach 2.5% in 2021. The recovery of the export-oriented manufacturing sector could reach 3.3% in 2022, despite the tourism and transport sectors still being handicapped by the Covid-19 and a decline in agriculture after a record year in 2020. Inflation remains relatively high (food price growth and subsidy cuts) at 5.5% year-on-year in the first three quarters of 2021.
"Economic recovery will depend on the pace of implementation of reforms. These have been held back by the lack of political consensus and the limited scope of the ambition to overhaul the public administration and state-owned enterprises," the EBRD report said.

Jordan is expected to grow by only 1.5% in 2021, thanks to healthy financial, business-related services, manufacturing and mining industries. The recovery of cross-border trade and the continuation of tourism will allow GDP to rise by 2.2% in 2022. Inflation stabilises after a surge to stand at 1.9% year-on-year in September 2021.

As for Lebanon, uncertainty remains more than ever. After a contraction of -25% in 2020, the absence of essential reforms continues to postpone the implementation of a programme supported by the International Monetary Fund (IMF). The EBRD estimates that in 2021, the country of the Cedar will remain in negative territory at -10%. Provided that reforms are undertaken and that the IMF disbursement occurs, Lebanon will see growth again in 2022, but it will not exceed 3%.

Read the full EBRD Regional Economic Outlook (REO) report (November 2021)

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